Finra Exam Series-7 Topic 4 Question 109 Discussion

Actual exam question for Finra's Series-7 exam

Question #: 109
Topic #: 4

[All Series-7 Questions]

An excerpt from a recent tombstone ad reveals bonds offered publicly at 101.

Why were they priced at a premium?

Ato enable investors to establish a tax loss when the bonds are redeemed at maturity

Bto reflect prevailing credit ratings and market conditions for the issuer

Cto provide the issuer with a larger deduction from pre-tax earnings for higher than usual interest payments

Dto comply with SEC rules mandating such pricing for debt issues maturing in the year 2000 and thereafter

Show Suggested Answer

Suggested Answer: C

premium. That's the term for the option cost.

by Deonna at Mar 22, 2025, 03:18 AM

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Glendora

1 months ago

Haha, I bet the tombstone ad writer was just trying to sound fancy. 'Bonds offered publicly at 101' - they're really not fooling anyone!

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Devora

3 days ago

B) to reflect prevailing credit ratings and market conditions for the issuer

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Gladys

12 days ago

A) to enable investors to establish a tax loss when the bonds are redeemed at maturity

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Laticia

22 days ago

A) to enable investors to establish a tax loss when the bonds are redeemed at maturity

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Rosendo

1 months ago

D seems like a stretch. I doubt the SEC has a rule specifically about pricing bonds maturing in 2000 and beyond. B is the most logical choice here.

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Karina

1 months ago

Interesting, I was thinking it might be C, but B makes more sense. The issuer probably wanted to offer a higher yield to attract investors.

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Gracia

19 days ago

Yeah, that makes sense. They likely priced the bonds at a premium to attract investors with a higher yield.

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Ty

26 days ago

I think B is the correct answer. The issuer probably wanted to reflect prevailing market conditions.

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Elizabeth

1 months ago

I believe the issuer priced the bonds at a premium to comply with SEC rules mandating such pricing for debt issues maturing in the year 2000 and thereafter.

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Alayna

1 months ago

Hmm, I think the answer is B. The bonds are priced at a premium to reflect the issuer's credit ratings and current market conditions.

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Alease

2 months ago

I agree with Shawnna. It makes sense that the premium pricing would be based on the issuer's creditworthiness and market conditions.

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Shawnna

2 months ago

I think the bonds were priced at a premium to reflect prevailing credit ratings and market conditions for the issuer.

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